We might be talking about a third-person narrator, but boy does that third person know what's going on in Frederick's head. We can see his every private preoccupation, and let us tell you, that brain of his has a tendency to, um, distort things a bit. Let's look at one moment in particular, when Frederick returns from Fontainebleau and finds himself in the thick of the battle:
The drums beat for the charge. Sharp cries, hurrahs of triumph burst forth. A continual ebbing to and fro made the multitude sway backward and forward. Frederick, caught between two thick masses of people, did not move an inch, all the time fascinated and exceedingly amused by the scene around him. The wounded, who sank to the ground, the dead lying at his feet, did not seem like persons really wounded or really dead. The impression left on his mind was that he was looking on at a show. (2.14.12)
All this chaos and turmoil is a spectacle for him, as he's totally detached from his surroundings. Sound like anyone you know? Say, you reading Sentimental Education? Hmmm.
Having the most inactive guy in the book be the center of the narration assure that the narrative as a whole really isn't concerned foremost with reality. Sure, the events are important—check out "Setting" for more on that—but we have to remember that we've got a slightly skewed perspective here.